The lesson is, the City never learns

So it seems that nobody is to be held criminally liable for Britain's biggest and most dramatic post-war financial scandal, the collapse of the Maxwell empire and the plundering of more than pounds 400m of pension assets. Although criminal charges are outstanding against a further two defendants in connection with the Maxwell affair, the Serious Fraud Office is unlikely to proceed with them after yesterday's unambiguous verdicts.

In the eyes of the law we can hold but one man responsible for one of the greatest financial crimes of the century.

Even in death, Robert Maxwell dominated the trial of his two sons, Kevin and Ian, much as he dominated and blighted them in life. It was always going to be difficult for the Serious Fraud Office to pin this great scandal on anyone but the dead tycoon. Even so, failure to target successfully anyone who could be held culpable must surely spell the end for what from the start has always looked a wholly inadequate organisation.

On the one hand, the SFO is accused of inability to secure convictions - such as in the case of the financial adviser Roger Levitt. On the other, it is charged with abuse of power and distortion of evidence in its efforts to convict - as in the case of Asil Nadir. The SFO experiment in the investigation and prosecution of fraud has plainly not worked and it is time for the Lord Chancellor to start administering the last rites. Whether the jury system has also failed the nation in its search for retribution is a more difficult question to answer. That debate will rage long and hard.

It may seem bad enough that the system is unable to hold anyone to account for this shocking episode in British corporate history. Worse, however, is the thought that we may not adequately have learnt from it, either.

Maxwell and the other fraudulent collapses of the early 1990s exposed a framework of corporate governance, accounting standards and pensions regulation so weak and vague as to be almost non-existent. Since the Maxwell collapse, there has been a determined effort in government, the City and the professions to put in place new law, rules, regulations and codes of conduct that will stop such abuse happening again.

Will it work? For a time, maybe. But whatever the safeguards, when a senior executive in a position of trust and responsibility is hell bent on fraud, there is not much you can do about it.

Memories are short, particularly in the City, where reputations are as easily bought and sold as any commodity. The proof of that is Maxwell himself. Robert Maxwell was officially exposed as a liar, cheat and bully many years before the can of worms opened up by his death. In the early Seventies, Board of Trade inspectors found him unfit to be a director of a public company over a business scandal in which he displayed all the traits that led to his nemesis.

The inspectors described Maxwell as a man of great energy, drive and imagination. Unfortunately, they went on, "an apparent fixation as to his own abilities causes him to ignore the views of others if these are not compatible". The concept of a board being responsible for policy was alien to him, the inspectors said.

Maxwell regarded his stewardship duties fulfilled by displaying the maximum profit any transaction could be devised to show. In reporting to shareholders and investors, the report concluded, he had a "reckless and unjustified optimism" which enabled him on occasions to disregard unpalatable facts and to state what he must have known to be untrue.

With the evidence of the Board of Trade before it, you would have thought that the City might have avoided Maxwell like the plague. From the start, he appeared congenitally unable to understand the difference between his own and other people's money, mixing his private and public company affairs in a way that was at best highly contentious and at worst fraudulent. The evidence of this was not just malicious rumour and hearsay, as Maxwell always tried to make out; it was down there in black and white in a Board of Trade report.

For many businessmen, this would have been a fatal setback. Maxwell's rehabilitation in the City is a story as remarkable as for many it is also embarrassing and unforgiveable. If there is a lesson to be had from it, it is that the City doesn't learn.

After 10 years in purdah, during which he ran a successful but private publishing group, Pergamon, Maxwell was able to reingratiate himself with the City and once more take advantage of the opportunities afforded by the capital markets. His big break came from NatWest, which asked him to try to revive the ailing and publicly quoted British Printing. He later won plaudits for his cost-cutting measures at Mirror Group. His achievement may always have fallen a long way short of his claims, but Maxwell was none the less able to present himself once more as an industrialist and entrepreneur of talent.

While institutional investors, the people who manage our savings and pensions, always remained deeply suspicious - with some boycotting altogether Maxwell's two main publicly quoted companies, Maxwell Communications and Mirror Group - the same could not be said of the bankers and image-makers. With big commissions and fees on offer, they backed him to the hilt, funding a reckless dash for growth by acquisition from the mid-Eighties onwards. Only a few City houses refused to deal with him altogether.

Today, both commercial and investment bankers are less easily taken in by the accomplished charmer and enthusiast. This more cautious attitude may say more about the recession than Maxwell, however. Come the next boom, it is highly likely that the old loose ways will return, complete with a whole new generation of "rough diamonds" to exploit them.

But some things have become more difficult as a result of Maxwell. The pensions fraud at the heart of the affair prompted extensive pensions law reform. While these reforms did not go as far as some would like, they do make a repeat of Maxwell's thievery considerably more difficult.

Not impossible, however, for the new legislation steers clear of a key reform: a requirement that pension assets be managed by a custodian independent of the employer. With sufficiently compliant trustees and managers, it might still be possible for the over-dominant executive to plunder the pension fund for his own purposes. Certainly there is nothing to stop the pension fund being required to invest heavily in the employer's own company, an abuse not confined to Maxwell during the rolling Eighties.

The other two areas of reform, accounting standards and corporate governance, again make a Maxwell sequel harder but not impossible. Audit standards and practices have largely outlawed the creative accounting techniques of the Eighties. With the number and size of negligence law suits mounting daily, including some massive ones relating to the Maxwell collapse, auditors have considerably strengthened their procedures.

Then there is the whole area of corporate governance, the way in which public companies are directed, controlled and made accountable to their shareholders. Born out of the excesses of the Eighties, the Cadbury committee was already working on new codes for directors when the Maxwell scandal broke. Maxwell gave fresh impetus to the search for ways of limiting the powers of the autocratic chief executive.

As the committee found, however, devising methods of control that do not severely limit the ability of management to act swiftly and effectively in the company's commercial interests is far from easy. Companies run along the lines of a medieval fiefdom may be things of the past, but the entrepreneurially directed company is not; because the risk reward of such companies is much higher, many investors positively prefer them that way.

Furthermore, in an age of transparency and the free flow of information, corporate life remains one of the last great bastions of secrecy. The Byzantine complexity and obfuscation that characterised the Maxwell empire is still practised in many major corporations.

Maxwell was an extraordinary man and the set of circumstances that allowed him to get away with what he did, perhaps unique. But could a different version of the same thing happen again? Yes, of course it could.